Charity Effectiveness and Third-World Economics

If the government shouldn't be printing money and giving it to the poor, doesn't that imply that they should be taking money from the poor and destroying it? Or did they somehow manage to find exactly the right amount of money for the poor to have?

If any charity is efficient (or merely more efficient than burning the money), then according to the philanthropist's values it would be better for the world if any government printed money and spent it on that charity. I don't think GiveDirectly is different in any meaningful way. As far as I can tell it sometimes seems different to people because thinking about giving cash reminds them that economics is a thing, which they often forget when thinking about other interventions.

There are some more subtle issues with inflation expectations, but I think those are really second-order considerations compared to the obvious "society gets more of what you pay for, and slightly less of everything else."

Why are we only talking about developing nations? If the last 6 years show us anything, it's that developed nations more often than not don't have competent economic advisors; and aren't listening to the ones they have. In particular, developed nations have mostly failed to follow the policy of monetary growth and inflationary spending that was appropriate for their situations.

I see no evidence that economists in developing nations are any less competent or wise than economists in developed nations. In fact, this demonstrates a very common fallacy: do not assume that people in the developing world are less smart or rational than people in the developed world. A much more accurate model of the world is formed by assuming that people everywhere have similar distributions of intelligence and rationality, and rationally respond to different circumstances based on their perceived self-interest and limited understanding. This doesn't mean they are perfectly rational (in the economic, not LessWrong sense of the word "rational) actors, any more than people in the developed world are. However it does mean that what you see on the ground is more likely to be a result of serving the self-interest of some individuals and groups than a simple failure to understand the situation economically.

Furthermore, developed nations that manage their own currency are much better able to inflate their way out of a liquidity trap. A nation like Panama that does not have its own currency, or a nation like Costa Rica whose currency is pegged to the U.S. dollar, or a nation like Cuba whose currency isn't freely exchangeable, or any nation whose debt is denominated in units other than that nation's own currency is much less able to implement such a strategy effectively. Greece's problems have been massively exacerbated by the Euro. If they had stayed with the Drachma they'd be in better shape. Contrast Greece with Iceland which had similar debt issues but maintained its own currency, and weathered the financial crises much more easily. A nation that with its own hard currency is much better prepared to redistribute wealth in this fashion. If its debts are denominated in that currency, so much the better.

My second thought was that it's likely true that some developing country governments could improve their economies by printing and distributing money, but they won't because they're corrupt, and giving directly is a workaround to force that policy upon them. This seems plausible at first, but it feels forced; the leaders' incentives here are ambiguous, not clearly aligned against this sort of policy.

If I remember correctly, didn't a significant portion of Zimbabwe's funding come from some Scandinavian charity which, as official policy, gave out local currency rather than dollars, and required buying the local currency from the government with real money at the official rate?

Is anyone making a serious effort to connect good economists with governments that need them?

Hopefully someone else will remember the actual source for this, as I can't find it quickly, but I believe the World Bank provides economic advice to African countries, which includes gems like "sell off commodity rights by public, transparent auction, rather than having the minister decide which country gets the rights," which will lead to billions more in the country's coffers (instead of millions more in the minister's coffers).

I think the "print money and hand it out" plan is a terrible one. If it replaced price caps on basic foodstuffs, that would be better as a starvation prevention measure (since it would encourage more production, rather than less production).

I think a better path for economic advice from the developed world is the Hernando de Soto path; see his organization or his book.

My third thought was that it's likely true that developing countries' governments could improve their economies by printing and distributing money, and they might not know this.

Sanity check. What sort of people do the poorest countries' governments have, in their economic advisory roles? Is anyone making a serious effort to connect good economists with governments that need them?

I'm fairly confident that Eliezer's perspective is that [most] developed countries' governments can also [currently] improve their economies by printing and distributing money, given that he's a fan of market monetarism.

Giving out cash to voters sounds like exactly the sort of policy third world countries are very good at doing. In fact, the very worst countries like Zimbabwe seem to be the best at it.

we should multiply our effectiveness estimates by dImports/d$, which is (asspull) 0.5

Don't you mean (1 - d(Imports)/d$)?

And of course even if all of it went to buying imported goods some benefit would still accrue. If those were high-grade capital goods, it could be better than 100% domestic spending!

One effect of inflation is that it tends to transfer wealth from creditors to debtors. Poor people are more likely to be debtors than creditors, so inflation would tend to work to their advantage. There was once a U.S. presidential candidate whose primary campaign promise was to cause inflation by increasing the money supply...